Question

Lito invests Php20,000.00 in a savings account that pays 3.75% simple interest. If he makes no withdrawals or deposits to the account, how much will be in the account after 6 years?

Answer 1

To find the future value of a principal amount with simple interest, we use the formula

`\begin{gathered} A=P(1+rt) \\ \text{where} \\ A\text{ is the future value} \\ P\text{ is the principal amount} \\ r\text{ is the rate in decimal form} \\ t\text{ is time in years} \end{gathered}`

The following are the given of the problem

Principal Amount - Php 20,0000.00

Rate - 3.75% when converted to decimal is 0.0375

Time - 6 years

Substitute the following given to solve for the future value

`\begin{gathered} A=P(1+rt) \\ A=20000\big(1+(0.0375)(6)\big) \\ A=20000\big{(}1+0.225\big{)} \\ A=20000(1.225) \\ A=24500 \end{gathered}`

Therefore, there will be Php 24,500 in the account after 6 years.